As part of the Biden Administration's overall strategy of enhancing environmental justice, the Department of Justice (DOJ) and Environmental Protection Agency (EPA) jointly announced last week the return (with modifications) of an old environmental enforcement tool—the Supplemental Environmental Project (SEP).
Reflecting hostility to expansive use of environmental enforcement both by EPA/DOJ and through citizen suits, the Trump Administration's Justice Department issued a memorandum on June 5, 2017, to prohibit settlement provisions that called for contributions to third parties. Those contributions were typically for the purpose of carrying out SEPs, environmentally useful projects executed by the third party and paid for by the defendant to offset some of the latter's potential civil or criminal penalty risk.
Corporate defendants liked SEPs, which look better and certainly feel better than a payment to the U.S. Treasury. Municipal agency defendants also favor SEPs, given that their violations often occurred because they were cash-strapped and the project might provide some otherwise unavailable public benefit (such as training for inspectors), as opposed to a large cash penalty that simply diverts funds from operations to the federal government.
Those benefits aside, the Trump Administration felt the SEPs could be used to avoid legislative approval for expenditure of federal funds and provide public relations benefits to groups they considered hostile to their goals. The policy was then placed in the regulations governing DOJ policies, at 28 CFR 50.28.
Not surprisingly, there has been considerable opposition and some litigation challenging the old policy. To address these issues, the current DOJ has revoked the former SEP policy, issuing a statement recognizing the long history and high value of SEPs and noting their particular benefits to disadvantaged communities. DOJ has replaced the Trump policy with an interim guidance while it prepares a new regulation.
The new guidance, however, does not give carte blanche to all SEPs. As had been EPA and DOJ SEP policy for several years, a project cannot be something that would otherwise be required or which a federal agency would carry out as part of its normal functions. It has to be a specific project with a specific connection to the alleged violations (air-related SEPs for air quality violations, for example) and cannot designate a specific third party as a recipient.
None of this is surprising or particularly limiting. A creative advocate should not be hampered in finding a project with genuine public value. SEPs are old friends to those subject to environmental enforcement actions. Welcome back!